The argument that we need to build more homes to tackle the housing affordability crisis was underscored this week by reports that suggest loan-to-value ratio (LVR) restrictions are having unintended – and negative – effects on the housing market.

According to the Registered Master Builders Association, the number of enquiries into new homes has fallen by 30 per cent since the Reserve Bank’s limit on how much money retail banks can lend on low-equity mortgages kicked in at the start of October.

LVRs, which are a fairly new addition to the monetary policy tool kit, were never supposed to tackle house price inflation. They are designed to serve as a stop-gap measure to de-risk our financial system while the supply constraints ease.

Unfortunately, the policy has made the situation worse. That’s alarming, because last year New Zealand only built about 15,000 new homes, half of the number of new homes built in the 1970s. Not coincidentally, the 1970s was the last time houses in New Zealand could rightfully be called affordable.

Also worrying is the fact that public sentiment seems to have swung in favour of a capital gains tax (CGT).

According to the most recent Fairfax Media Ipsos poll, just over half of the 1,030 people polled said they thought a CGT on investment properties would help tackle high prices, up from 37 per cent in August.

Yet we don’t have to look very far to see that a CGT that exempts the family home won’t have much impact. Australia has just such a CGT, which has been in place since the mid-80s, and the country’s housing market is in much the same position as ours.

The UK also levies a CGT on investment properties, and yet house price inflation is nearing the 10 per cent mark in London, according to the latest figures.

It seems absurd to adopt a policy that has been shown to be pretty much useless at controlling house prices, while obtusely ignoring the fact that the UK, Australia and New Zealand simply aren’t delivering enough new homes to keep up with demand (or address the backlog).

The Housing Accords and Special Housing Areas Act could potentially inject thousands of new houses into the system over the next few years, but it fails to address the fact that local government incentives will still be stacked against development when it auto-repeals itself in 2018.

Our international research shows that a brace of policy measures is needed to dilute the infrastructure costs of new housing, incentivise local government to welcome development, and provide a competitive alternative to restrictive and unresponsive planning structures.

We are set to release our recommendations when we launch our third housing report on Monday,18 November.